Correlation Between Value Fund and High Income
Can any of the company-specific risk be diversified away by investing in both Value Fund and High Income at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Value Fund and High Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund Investor and High Income Fund, you can compare the effects of market volatilities on Value Fund and High Income and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Value Fund with a short position of High Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and High Income.
Diversification Opportunities for Value Fund and High Income
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Value and High is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor and High Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Income Fund and Value Fund is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Value Fund Investor are associated (or correlated) with High Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Income Fund has no effect on the direction of Value Fund i.e., Value Fund and High Income go up and down completely randomly.
Pair Corralation between Value Fund and High Income
Assuming the 90 days horizon Value Fund is expected to generate 1.48 times less return on investment than High Income. In addition to that, Value Fund is 4.21 times more volatile than High Income Fund. It trades about 0.04 of its total potential returns per unit of risk. High Income Fund is currently generating about 0.26 per unit of volatility. If you would invest 863.00 in High Income Fund on August 24, 2024 and sell it today you would earn a total of 8.00 from holding High Income Fund or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Investor vs. High Income Fund
Performance |
| Timeline |
| Value Fund Investor |
| High Income Fund |
Value Fund and High Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and High Income
The main advantage of trading using opposite Value Fund and High Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, High Income can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in High Income will offset losses from the drop in High Income's long position.| Value Fund vs. Vanguard Small Cap Value | Value Fund vs. Vanguard Mid Cap Value | Value Fund vs. Vanguard Small Cap Index | Value Fund vs. Vanguard Emerging Markets |
| High Income vs. Blackrock High Yield | High Income vs. HUMANA INC | High Income vs. Aquagold International | High Income vs. Barloworld Ltd ADR |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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